After purchasing the 230,000-square-foot office development at a steep discount, Peninsula-based SC Properties is set to purchase the neighboring commercial property for nearly 40% less than the previous purchase amount.
Located at 1840 Gateway Drive in San Mateo off Mariners Island Boulevard but south of State Route 92, the nearly-completed purchase of the four-story building currently has two floors occupied, with the other two previously housing WeWork. SC Properties Partner Kevin Phillips said the commercial market has started picking up over the last year. When the firm purchased the neighboring Gateway property, demand largely came from companies interested in smaller spaces, though interest in bigger spaces has picked up.
“A lot of people didn’t want large spaces anymore, even if they already have an established company … people were doing a blended, hybrid thing,” Phillips said, adding that the team saw success in taking large office spaces and making them smaller to accommodate demand. “That is still happening but now we are seeing people starting to look at larger spaces, including AI.”
Previously, many tenants comprised construction, law firms and insurance companies, though a higher share include artificial intelligence companies. While AI presence has largely been concentrated in San Francisco, Menlo Park and Palo Alto, the more affordable options in parts of San Mateo are becoming more attractive, Phillips added.
“A lot of them need a [research and development] component so a lot of them either need a warehouse that's close by or they need to have their space be a contiguous, quasi-warehouse space with an office,” Phillips said.
Last year, SC Properties purchased nearby properties on Gateway Drive, which previously sold for $96 million about eight years ago, he said, with SC Properties purchasing it for $37 million.
“When we bought it, it was at 40% vacancy, and that was indicative of the office market then,” he said.
According to a CBRE report, the Peninsula office market saw a nearly 25% vacancy rate last quarter, with occupancy declining for the third quarter in a row. But Phillips said the market is starting to pick up, with companies more interested in renting larger spaces.
“In the last six months, it’s picked up considerably. There are a lot more tours,” Phillips said. “It’s really encouraging.”
(0) comments
Welcome to the discussion.
Log In
Keep the discussion civilized. Absolutely NO personal attacks or insults directed toward writers, nor others who make comments.
Keep it clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't threaten. Threats of harming another person will not be tolerated.
Be truthful. Don't knowingly lie about anyone or anything.
Be proactive. Use the 'Report' link on each comment to let us know of abusive posts.
PLEASE TURN OFF YOUR CAPS LOCK.
Anyone violating these rules will be issued a warning. After the warning, comment privileges can be revoked.